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an areas for enabling them to raise their income levels and improve living standards. Micro finance as a major financial service emerged in the 1970s, notably after Muhammad Yunus, the Nobel Laureate from Bangladesh started the Grameen Bank. Delivery of credit at the doorstep of those who are not covered by the formal banking business, coupled with capacity building, is one of the ways for achieving financial inclusion. The most important economic rationale in such financial inclusion of the poor in the economy is the transaction costs. For formal banks, it will be costly to mobilize the small savings of the poor families lying widely scattered. Equally prohibitive is the cost to the conventional banks in financing a large number of these families who require credit frequently and in small volume and that too not backed by collateral securities. Commercial banks see in it a new profitable area of credit with a high repayment rate in a world of mounting non-performing assets and sub-prime hazards. Many governments welcome it as a less burdensome missile of fighting poverty.

The Indian state put stress on providing financial services to the poor and underprivileged since independence. The commercial banks were nationalized in 1969 and were directed to lend 40% of their loan able funds, at a concessional rate, to the priority sector. The priority sector included agriculture and other rural activities and the weaker strata of society in general. The aim was to provide resources to help the poor to attain self sufficiency.

To supplement these efforts, the credit scheme Integrated Rural Development Programme (IRDP) was launched in 1980. But these supply side programs (ignoring the demand side of the economy) aided by corruption and leakages, achieved little. Further, the share of the formal financial sector in total rural credit was 56.6%, compared to informal finance at 39.6% and unspecified sources at 3.8%. Not only had formal credit flow been less but also uneven. The collateral and paperwork based system shied away from the poor. The vacuum continued to be filled by the village moneylender who charged interest rates of 2 to 30% per month.

It was in this cheerless background that the Microfinance Revolution occurred worldwide. In India it began in the 1980s with the formation of pockets of informal Self Help Groups (SHG) engaging in micro activities financed by Microfinance. The first official effort materialized under the direction of National Bank for Agriculture and Rural Development (NABARD) when the Mysore Resettlement and Development Agency (MYRADA) sponsored project on “Savings and Credit Management of SHGs” was partially financed by NABARD during 1986-87.

In Mizoram, the Micro Finance programme started lately with the setting up of Mizoram Rural Bank in 1983 with its head office at Aizawl, the state capital of Mizoram. Since its inception the bank is serving hard to achieve its objectives. In view of the emphasis given by the central government on promotion of micro-enterprises in rural areas through the mechanism of self-help groups, the bank branches are advised to form self-help groups and was intended that SHG linkage as a part of banks mainstream credit operation. In its endeavor, till March 2008, MRB has formed 1165 SHGs out of which 1080 groups have been credit linked.

The Swarnajayanti Gram Swarojgar Yojana (SGSY) is a major on going programme which